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Mediating Effects of Liquidity in the Relationship between Earnings Quality and Market Value of the Share Price: Evidence from Jordan

Author

Listed:
  • Fares Alsufy

    (Faculty of Business, Isra University, Amman, Jordan)

  • Malik Abu Afifa

    (Al-Zaytoonah University of Jordan,Amman, Jordan)

  • Mohammed Zakaria Soda

    (Faculty of Business, Isra University, Amman, Jordan)

Abstract

The current study aims to investigate the effect of earnings quality on the market value of the share price, and then the role of liquidity as a mediating effect in the relationship between earnings quality and the market value of the share price. This study provides some empirical evidence from an emerging market, especially from Jordanian market. The framework of this study is developed by the classical valuation theory that discusses the factors that affect the market value of the shares prices. Also, this study is a quantitative study using a panel data analysis. The study population includes all Jordanian industrial public shareholding companies listed in the Amman Stock Exchange (ASE) during the year 2012 to the year 2017, where there are 62 industrial companies listed in ASE during this period. The study sample is all targeted companies that are included in the study population. In other words, it uses a comprehensive sample method. In conclusion, a high earnings quality and more liquidity in Jordanian industrial public shareholding companies increase their market value of the shares prices. At the same time, liquidity mediates the relationship between earnings quality and the market value of the shares prices of those companies. Moreover, the level of Jordanian market controlling of earnings quality and liquidity is a good one. The study recommended to continually investigating the relationship between organizational factors and earnings management, which may have a positive effect on the market value of the shares prices.

Suggested Citation

  • Fares Alsufy & Malik Abu Afifa & Mohammed Zakaria Soda, 2020. "Mediating Effects of Liquidity in the Relationship between Earnings Quality and Market Value of the Share Price: Evidence from Jordan," Review of Applied Socio-Economic Research, Pro Global Science Association, vol. 19(1), pages 17-32, June.
    • Handle: RePEc:rse:wpaper:v:19:y:2020:i:1:p:17-32
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    References listed on IDEAS

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    Cited by:

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    2. Malik Abu Afifa & Isam Saleh & Fadi Haniah, 2021. "Direct and Mediated Associations Among Ownership Structure, Cash Holdings and Firm Value: The Case of Jordanian Insurance Firms," Vision, , vol. 25(4), pages 471-482, December.
    3. Malik Abu Afifa & Fares Alsufy & Ahmad Abdallah, 2020. "Direct and Mediated Associations among Audit Quality, Earnings Quality, and Share Price: The Case of Jordan," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(3), pages 500-516.

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    More about this item

    Keywords

    Information opacity; Earnings quality; Investor protection; Emerging market shares; Industrial Companies.;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • G40 - Financial Economics - - Behavioral Finance - - - General
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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